Self-drive car rental firms like Zoomcar take leasing model for a spin

After Revv and Myles Cars, now Zoomcar has also thrown its weight behind its leasing programme Zoomcar Associate Program (ZAP) that was launched in January this year.Supraja Srinivasan | ET Bureau | September 15, 2017, 08:46 IST

On-demand self-drivecar rental firms are increasingly opting for a car-leasing model to expand their fleet as they step on the gas to turn profitable and cut losses.

After Revv and Myles Cars, now Zoomcar has also thrown its weight behind its leasing program Zoomcar Associate Program (ZAP) that was launched in January this year. “ZAP now forms 20% of the company's revenues and we are on track (for the programme) to contribute 75-80% of the revenues by December-January,“ Zoom car CEO Greg Moran told ET.

Currently, about 600 cars of the Bengaluru-based firm's 3,000 strong fleet are owned by registered individuals across cities like Delhi, Mumbai, Bengaluru, Chennai and Pune.

Since the start of 2017, other major players such as Revv and Myles, too, have been steadily downsizing the proportion of cars they own on their books, to move to an asset-light model.

Under the leasing model, these self-drive car rental firms encourage individuals to either list their existing cars in its fleet or buy new cars and list them on the platform under a profit-sharing model that provides them returns of 50-75%.

Myles Cars, which is owned by Delhi-based Carzonrent, now has 50% of its 1,500-strong fleet provided by its leasing programme Myles Angels that it launched early this calendar.

Myles plans not to own cars in the future. “We are now phasing out the self-ownership model and will only have a fleet through the Myles Angels programme,“ said Sakshi Vij, CEO of Myles Cars that is present across 21cities.

Gurgaon-based Revv, which adopted an asset-light strategy last year, has 40% of its fleet owned by individual entrepreneurs while another 30% is owned by institutional partners, with the company owning the remaining 30%.

“The real merit of the (leasing) model lies in its high scalability and low capital intensity,“ said Karan Jain, co-founder of Revv.“This model has enabled us to get to almost zero capex for asset on-boarding,“ he told ET.

The model contributes about 40% to Revv's topline, Jain said.

For Zoomcar, the focus on expanding its fleet via a leasing model is at the centre of its strategy towards reaching net profitability by the end of FY18.

“In the next 2-3 years, ZAP will make Zoomcar profitable by 10% and will have around 7,000-8,000 cars under its fleet by ZAP model,“ Moran said. The company is looking to take its overall fleet size to 25,000 over the next three years.

However, the path to profitability for these firms may not be easy given their high cash burn. In FY16, Zoomcar clocked losses of Rs 101 crore while Revv and Myles Cars accrued losses of Rs 7 crore and Rs 21 crore, respectively. For FY17, the companies declined to comment on the cash burn but maintained that revenue as also fleet size grew between 100-200%.